After 34 years, the South Bay’s major theater company — one of a handful of organizations that provided the area with cultural distinction — has closed its doors in the wake of its latest financial crisis. Theater officials announced Wednesday that the troupe has shut down operations and will file for Chapter 7 bankruptcy immediately.

“I’m just devastated right now,” said producing artistic director Rick Lombardo, “for the community, for our staff, for the artists.”

News of the theater’s death sent shock waves throughout the valley’s tight-knit arts community. “This is disastrous,” said Lisa Mallette, head of City Lights Theater Co. in San Jose. “Losing its flagship nonprofit live theater company will be a very real tragedy for the entire South Bay community.”

The cash-strapped company’s board of trustees said the move was taken reluctantly after a long, hard struggle to stay afloat. The board considered an emergency fundraising campaign but decided the finances were too much of an uphill battle going forward.

“It’s heartbreaking that the Rep can’t survive, but the reality is that the community just doesn’t have the drive to support it,” said Paul Resch, the vice president of the board. “The money just wasn’t there. No one wants to give to an organization that is in trouble. We went from crisis to crisis, and there was no cash buffer.”

Founded in 1980 on a shoestring budget, the Rep, which presented a mix of seven dramas, comedies, musicals and classics annually, has been financially flailing in recent years. In 2006, on the edge of insolvency, the theater, which had a $5 million annual budget and 51 employees, turned to the city for a $2 million bailout that later was restructured into a long-term mortgage-type loan. Auditors’ reports have long warned of the company’s instability, as the Rep faced a triple-whammy of flagging ticket sales, slumping donations and rising costs. Subscribers had slid from 11,000 in 2006 to 5,500.

Theater officials estimate total debt at about $3 million but stress that cash flow was the real obstacle.

“They’ve had a lot of ups and downs over the years, so I can’t say I’m entirely surprised, but I am very disappointed,” said San Jose Mayor Chuck Reed. “I was hoping they would pull out of it.”

As for the fate of the iconic blue theater building, which the city owns, officials say there is every intention of maintaining the 535-seat venue as a cultural gem of the downtown. Currently, the space is occasionally used by local arts events such as the San Jose Jazz Festival and the Cinequest Film Festival.

“There are a lot of creative possibilities,” said Kerry Adams-Hapner of the city’s office of cultural affairs. “We want to keep the building alive.”

Some observers complain that the Rep never connected deeply enough with its audience. Several recent productions, such as the Indian call center drama “Disconnected,” drew poor ticket sales. Others suggested the Rep’s programming didn’t incorporate enough minority themes or playwrights.

“This is what happens when your theater is deliberately indifferent to the diversity of your city,” said director and scholar Tlaloc Rivas.

South Bay organizations have long struggled to get out from under the shadow of high profile San Francisco arts groups with deep pockets and high-society patrons. And San Jose Rep wasn’t alone in fighting the tide of red ink. Ballet San Jose has undergone several fiscal crises. Shakespeare Santa Cruz went under last year and then managed to come back to life. American Musical Theatre of San Jose folded in 2008.

“This is a wake-up call for all San Jose arts organizations,” said Peter Allen, a San Jose Arts Commissioner. “The salad days aren’t coming back.”

Rep founder Jim Reber has long bemoaned the struggles facing arts groups in a tech hub.

“It’s a shame that there is not enough support for the arts in this community. But there aren’t enough big donors who step in to save the day,” he said. “What we need is a few white knights charging in to save the arts.”

Reed agrees that big-ticket donors for the arts are hard to come by in the valley.

“There’s a lot of philanthropic money in this valley,” he said, “but there’s not as much as you might think because a lot of that money gets invested globally and not locally.”

Pending completion of the Chapter 7 liquidation process, it remains unclear whether patrons will be refunded for tickets already purchased. A production of Joe Penhall’s drama “Landscape with Weapon” was due to open June 19.

TheatreWorks in Mountain View has offered to let Rep patrons exchange their tickets for “Landscape with Weapon” for “Marry Me a Little” at TheatreWorks. Some exchanges may also be available for those holding tickets for next season.

The city may also have to eat much of the $2 million loan it made to keep the Rep afloat, as it did with a $1 million bailout for the American Musical Theatre. However, Adams-Hapner said the city will work to recover at least a portion of the funds.

Many see the loss to the fabric of the valley’s cultural life as far bigger than any dollar amount. Long a cornerstone of the cultural scene, the Rep, which at its peak could cast such big names as Holly Hunter and Lynn Redgrave, was a symbol of the creative pulse of the South Bay.

“Its vibrant and adventuresome productions have given a technology-driven city an artistic soul,” said Robert Kelley, artistic director of TheatreWorks. “What a tragedy to lose this pillar of the arts in the Bay Area.”

No one was harder hit than Reber, the company’s founder.

“It’s a total shock,” he said. “I can’t make sense of it. I feel numb. It can’t be real.”

Karen D'Souza is the theater critic for the Mercury News and the Bay Area News Group papers. She is a three-time Pulitzer juror, a former USC/Getty Arts Journalism Fellow and a longtime member of the Glickman Drama Jury and the American Theatre Critics Association. She has a Master's Degree in Journalism from UC Berkeley. She is a Twitter addict (@KarenDSouza4), a fangirl and a mommy and her writings have appeared in the Los Angeles Times, Miami Herald, the San Francisco Chronicle and American Theatre Magazine.

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